Trading Plan for 8/12
If Monday’s rally were bullish… then did it require closing above the open? The afternoon’s decline retraced the morning’s rally. All of the session’s net gain was already produced at the open, overnight.
Pattern points… (Setups and technicals)[pay]
Monday’s open gapped up to 1934.00, but didn’t extend higher immediately. In fact, the opening 15 minutes of volatility had lapsed. Resistance was 1934.00, so extending above it wasn’t just noise. And that extension fulfilled its target up to 1941.00.
So, was retracing it all just noise?
Yes. So long as the open’s retest holds the afternoon’s retracement, the rally can resume. The morning’s extended rally was created by buying pressure, triggered above 1934.00. It was not an effort to stretch the rubber band so it could snap back down. The afternoon’s retracement didn’t snap back down, but tested th morning’s 1934.00 open without extending through it.
Granted, the 1941.00 interim high did fulfill the buying pressure that was triggered above 1934.00. Having retraced back to the 1934.00 trigger, closing more than 61.8% of the way back to 1941.00 (above 1937.50) would have signaled another rally attempt underway from Friday was topping. That didn’t happen, as Monday’s late-afternoon bounce held at 38.2% up to 1935.50, 2 points shy of retracing 61.8%.
The close was overlapping 1932.50. That was the afternoon’s bias-down signal, and relevant support. Closing decisively under it would have been bearish. Its test wasn’t rejected, which would have been bullish. Gapping down Tuesday would form an Island Reversal, but not gapping down would be likely to test fresh highs.
[/pay]What’s Next… (Outlook and opportunities)[pay]
A presidential press conference is scheduled from Monday afternoon. And Tuesday’s econ calendar is the first in a week to have any influential items. The less distraction, the more potential for extending higher. Making it through an otherwise distracting event without reversing down would be more capable of resuming the rally.[/pay]
Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.